Frequently Asked Questions About Bankruptcy

Financial stress can affect all aspects of your life; it may interrupt your sleep and nag at you throughout the day. A bankruptcy filing can do the following:

• Stop creditor harassment, foreclosure actions, repossession of  vehicles and garnishment of paychecks
• Discharge debts, including medical bills and credit card debt
• Deal with liens on property

  Bankruptcy can give you the chance to regain control over your finances.

That depends. Chapter 7 bankruptcy requires you to pass a means test. This involves inputting your income, debts and financial obligations into a formula to assess your ability to repay your debts. The means test was added as part of the 2005 bankruptcy reform, but it is not a barrier to getting the financial fresh start that you need.

If you do not qualify for Chapter 7, you could still qualify for Chapter 13 (a structured repayment plan). Some debts may be discharged in Chapter 13 while others become a part of the repayment plan. These cases are highly fact-specific based on your unique situation.

The idea that you will lose all your property in bankruptcy is a common misperception. You will likely get to keep more than you might think. In California, you can select from one of two exemption lists. We can review them with you and help you decide which is best for you.

Here are two general California property exemptions:

• You can keep a vehicle that has up to $3,500 of equity
• You also get a wild card exemption — protecting property valued at up to $24,000 (this may allow you to keep a car worth more than $3,500)

Retirement accounts are also exempt. Employer-provided accounts, such as a pension or 401(k) account, and individual IRAs will not be affected by a bankruptcy filing. The policy behind bankruptcy is to provide a fresh start, not put your future in greater jeopardy.

Yes,, bankruptcy is designed to immediately stop creditors from collecting debts and pursuing you when you file bankruptcy. This is called the automatic stay. During the bankruptcy case your creditors can no longer sue you, garnish wages, levy accounts etc. Assuming that you successfully complete your bankruptcy case and get a discharge of your debts then those creditors are forever barred from coming after you again. If you have a debt that was not discharged, for example child support, then that creditor could resume collecting from you.